Risk asset prices were perhaps set back slightly and temporarily by the recent seemingly-misplaced obsession over the “inversion” of the yield curve. The data driving that inversion were obviously an issue, but the inversion itself was probably reinforcing.
And part of the recent rally is related to that obsession dissipating, in response to the data, and with the mere passage of time and opportunity to reflect. People may be more easily fooled by data mining at first blush than upon consideration.
With the ‘recession scare’ now presumably behind us, an obvious question is what lies ahead – for the economy. My base case is trend growth, and we appear almost to be there. Along with non-extreme valuation, this implies a mediocre backdrop for risk assets from here. I look forward to being able to change this tune.